1. Mergers, Acquisitions & Takeovers
1.1. This type of expansion occurs when 2 business become INTEGRATED. This can happen by joining together and forming a bigger combined business (a merger) OR by one company taking over the other (an acquisition). When the acquisition is unwanted by the company being aquired. then this is known as a TAKEOVER or "HOSTILE TAKEOVER"
2. Integration: this can happen in 4 main ways.
2.1. 1: Horizontal Integration: this is when 2 businesses integrate who are in the same line of business and in the same chain of production. (E:g. Fiats acquisition of Chrysler Motors)
2.2. 2: Backward Vertical Integration: this occurs when one business integrates with another business further back in the chain of production. This can occur when a business wants to protect its supply chain. (E.g. in 2008 Starbuck's bought a coffee manufacturer to have control over processing the coffee beans)
2.3. 3: Forward Vertical integration: this occurs when one business integrates further forward in the chain of production. This occurs when a business wants to ensure a secure outlet for its products (E.g. Walt Disney merged with ABC to ensure an outlet for their filim and media products)
2.4. 4: Conglomeration: this is when 2 businesses in unrelated business lines integrate. This is known as diversification and can occur to reduce risk. (E.g. The Indian Tata group have many businesses. Tata Steel, Tata Chemicals, Tata Hotels. If one is to fail then others might still be successful)
3. Joint Ventures
3.1. This is when 2 businesses agree to combine resources for a specific goal normally for a defined period of time.
3.1.1. 1: A separate business is created funded by the 2 "parent businesses". (This has its own legal entitiy)
3.1.2. 2: Once the period of time is over the business is either dissolved, incorporated into one of the parent businesses, or the time frame may be extended.
3.1.3. 3: Joint ventures can be mutually beneficial and the company can benefit from shared skills and collaboration
3.1.4. 4: There can be disagreements with JV's as it is essentially a partnership
3.1.5. 5: A good example of a Joint venture is Sony - Ericsson
4. Franchises
4.1. This is another form of external growth. It is becoming popular with businesses who want to expand globally.
4.1.1. 1: the FRANCHISOR is the original business idea that sells the idea to other businesses, which allow them to offer the concept.
4.1.2. 2: the FRANCHISEE is the business who buys the right to offer the concept
4.1.3. 3: examples include McDonalds, Budget car hire and many many others.
5. THE END!!!
6. Internal Growth
6.1. occurs when an organisation expands using its own resources, without involving other organisations. Also known as ORGANIC GROWTH
6.1.1. 1: Brand identity and corporate culture can be maintained
6.1.2. 2: Less risky if financed by retained profits
6.1.3. 3: Will involve expanding the product range or locations
7. External Growth
7.1. occurs when a business relies on third party organisations for growth, e.g. mergers, acquisitions and franchising. Also known as INORGANIC GROWTH
7.1.1. 1: Is the quickest form of growth
7.1.2. 2: Uses external sources of finance
7.1.3. 3: More bureaucratic especially with mergers and acquisitions
7.1.4. 4: Greater financial risk
7.1.5. 5: Can eliminate competition
8. Strategic Alliances
8.1. These are similar to JV because they involve collaboration. However, there are distinct differences
8.1.1. 1: More than 2 businesses may be part of the alliance
8.1.2. 2: No new business is created, it is just an agreement to work together for mutual benefit
8.1.3. 3: Individual businesses within the alliance remain independent
8.1.4. 4: Strategic alliances are more fluid than joint ventures. Membership can change without destroying the allaince